What might a savings pot of £100,000 get me as a retirement income?

Aboodi | Greater London| 06/09/2017 | 2

  • Pension

Aboodi's question in full

What might a savings pot of £100,000 get me as a retirement income?

Holly Mackay's Response

Lots of people we speak to don’t know how much their current savings will actually get them as an annual income once they retire. As a very very crude rule of thumb, we divide the total you have by 20 to get an estimation. So if you have £100,000 saved, you might use £5,000 a year of pension income as a guide.

To get a more specific answer tailored to your circumstances, use this tool from the Money Advice Service.

This is based on you buying what we call an ‘annuity’. This is trading in your lump sum for a fixed annual income until you gasp your last. Your other option is what we call ‘draw down’ – to stay invested in the markets, so you still have ‘skin in the game’, and to withdraw money from this pot as it (hopefully) grows cos stock markets go up over time. So the idea is that you might take out £5,000 a year BUT the £100,000 investment pot might go up by about 4-5% a year.

You should also take into account your state pension entitlement. The rules have changed recently and this has a particularly significant impact on women in their early 60s today. This calculator will tell you at what age you will be eligible for the State Pension. Loads of us grew up with the idea stuck in our heads that this was 60. Well that’s not true anymore. For most in their 40s today, it is more likely to be 67.

As a rough guide here, think about how many years you have paid National Insurance for/how long you have worked. Multiply every year by £4.44 and that will give you your weekly State Pension estimate. 20 years all in? That’s about £90 a week. Or another £4,600 a year.

So all in, if you have £100,000 saved and you have worked for 20 years, you can expect an annual retirement income of just under £10,000 a year – rough guide only!

This Retirement Income guide from us will help you walk through your numbers. Good luck!



Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

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Holly Mackay

Founder and MD of Boring Money, Holly Mackay has been working in the investments space since 1998. She read Modern Languages at Oxford, with a special focus on Mediaeval French which was deeply interesting and arguably utterly useless.

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